On Friday, February 5, the Central Bank of Nigeria (CBN) issued a circular ordering commercial banks and other financial institutions to close accounts of persons dealing in cryptocurrencies. Some of such cryptocurrencies include Dogecoin, Bitcoin, and Etherium.
According to the Central Bank, all transactions involving cryptocurrency are “prohibited” with “severe regulatory sanctions” awaiting erring institutions.
The Central Bank also called on banks to identify “persons and or entities transacting in, or operating cryptocurrency exchanges within their systems and ensure that such accounts are closed immediately.”
These directives are nothing new, as in 2017, the central bank issued a warning against the transaction of cryptocurrencies.
On Sunday, February 7, The Central Bank of Nigeria (CBN) issued a five-page statement clarifying its position.
“It is important to clarify that the CBN circular of Feb. 5, 2021, did not place any new restrictions on cryptocurrencies, given that all banks in the country had earlier been forbidden, through CBN’s circular dated Jan. 12, 2017, not to use, hold, trade and/or transact in cryptocurrencies,” the statement said.
Despite the directive, since 2017, the use of cryptocurrencies in Nigeria is on an astronomical rise. Some speculate that Nigerians have traded over US$500 million in bitcoin in the last five years, making Nigeria the second largest bitcoin market after the United States of America.
The benefits of trading in Cryptocurrencies
Cryptocurrency has been of tremendous benefit to Nigerian investors. Cryptocurrencies are protected from inflation, exchange rate depreciation, and capital controls which provides a hedge for Nigerian investors.
Moreover, during the #EndSARS Movement, in which protestors hit against police brutality in the country, bitcoin was the major source of funding for activists. This was after the government and Central Bank allegedly blocked donations coming through local payment platforms.
Reason for the ban
According to the statement by the CBN, cryptocurrencies were increasingly being used for financing terrorism, money laundering, and other criminal activities due to the anonymity that cryptocurrency provides.
“Due to the fact that cryptocurrencies are largely speculative, anonymous, and untraceable they are increasingly being used for money laundering, terrorism financing, and other criminal activities,” the statement said.
In 2017, The Nigerian Deposit Insurance Corporation, NDIC, said that an estimated three (3) million Nigerians lost N18 billion (US$47 million) was lost in the Mavrodi Mundial Movement, MMM, ponzi scheme.
Many Nigerians have, however, taken to social media and other media platforms to speak against the move including the Former Vice-President of Nigeria Alhaji Atiku Abubakar.
“This is definitely the wrong time to introduce policies that will restrict the inflow of capital into Nigeria, and I urge that the policy to prohibit the dealing and transaction of cryptocurrencies be revisited,” Abubakar wrote on Twitter